New Delhi: The government has been accused of a massive coal scam by the opposition - both Houses of Parliament were adjourned this morning. The latest crisis for the government is based on a draft report on coal mining by the government's auditor, the Comptroller and Auditor General (CAG). The leaked draft finds fault with the allocation of 155 coalfields to about 100 private and some public sector units or state-run firms between 2004 and 2009 instead of auctioning them off to the highest bidder. The losses, according to the draft report, add upto Rs 10.7 lakh crore. The auditor does not make accusations of corruption, but says the government had extended "undue benefits" to the companies, and that in the absence of an auction, the sale of the coalfields was "subjective" and allowed "windfall gains." (Excerpts from coal scam report by Govt auditor (CAG)

The Prime Minister oversaw the coal ministry for some of the period in question in the draft report. The government says it has so far not received a copy of the report. The Prime Minister's Office says that it got a letter from the Comptroller and Auditor General of India this afternoon. The letter allegedly states that "In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading...Pursuant to clarification provided by the Ministry in exit conferences held on 9.02.2012 and 9.03.2012, we have changed our thinking .... In fact it is not even our case that the unintended benefit to the allottee is an equivalent loss to the exchequer. The leak of the initial draft causes great embarrassment as the Audit Report is still under preparation." (Prime Minister's Office on CAG report on coal mining)

The emphasis by the CAG on an auction echoes the Supreme Court's recent order which said the government must use an auction to distribute all natural resources. That order came as the Supreme Court cancelled 122 telecom licenses that were sold, not through a bidding process, but to companies that were allegedly favoured in a distorted first-come-first-served process. In its draft report, the auditor says that the coal offered to firms was severely under-valued by the government and an auction of the coal-blocks would have helped ensure that the benefit of the low costs of coal production is passed on to the public.

India is the world's third-largest coal producer in the world after China and the United States. State-run power company NTPC told Reuters it had made no windfall profits from the allocations and that the lower costs meant cheaper electricity for consumers.

Coal Minister Sriprakash Jaiswal said that the government used advertisements in newspaper ads to invite offers for the coal fields in question. He also said that all state governments were consulted before the allocations were completed, and that BJP or Left led governments in states like West Bengal and Rajasthan had expressed reservations about an auction. "The coal blocks are allocated through a screening committee which is chaired by Coal Secretary," he said. Before that, he explained, "We gave advertisements for allocation of coal blocks and invited applications...after the applications were received by us (Coal Ministry), the state governments were consulted and thereafter the coal blocks were allocated."

The Indian subsidiary of ArcelorMittal and steel makers Tata and Jindal Steel and Power, are among the companies named in the report. Jindal's controlling shareholder, Naveen Jindal, who is also a member of parliament, defended the policy of direct allocations, saying it had allowed private companies to jump-start production at mines left idle by state-run Coal India Limited, the world's single largest producer

The UPA has spent the last year trying unsuccessfully to beat its image as a government operating in a continuum of corruption and crisis, unable to implement reform or introduce transparency. "The Congress-led UPA government is looting the country. We can't allow this to happen. We have given notices under various rules today and will discuss with the leaders today and decide our next course of action," said Prakash Javadekar, BJP spokesperson as the party demanded a CBI probe into the alleged scam. Gurudas Dasgupta of the Left said, "This is a government of scams. All CAG reports indicate about misuse of public money...ministers, politicians are involved."